Manufacturing PMI hits 12-year high

Here’s some excellent economic news, with the Australian Industry Group’s manufacturing PMI jumping 4.6 points to 58.1 points in March 2016, taking the index to its highest level in 12-years:

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) surged by 4.6 points to 58.1 points in March 2016, indicating a strong expansion in manufacturing activity in March, relative to February.

This was the highest level for the Australian PMI® since April 2004 and means the current expansion of nine months is the longest since 2006. Parts of the manufacturing industry continue to strengthen and recover – following a prolonged period of contraction – as exports and import replacements are assisted by the lower dollar.

The shift down in Australia’s currency from its highs of two years ago is central to the current growth of manufacturing, boosting exports and import-­competing producers. However the Australian dollar has recently appreciated and if this appreciation continues the current expansion may be limited.

The seven activity sub-­indexes in the Australian PMI® all improved in March, with production (60.0 points) and new orders (61.7 points) now expanding strongly.

Five of the eight manufacturing sub-­sectors in the Australian PMI® expanded in March (three month moving averages). The largest sub-­sector of food & beverages continues to perform very strongly (71.0 points) with wood & paper also expanding well in March (65.1 points). The large machinery & equipment sub-­sector moved from contraction to stable in March (50.9 points) for the first time since January 2012.

Manufacturers signalled positive conditions in March as they move out of the summer holiday period. Export volumes are up especially in the food and beverages sub-­sector. Conditions are mixed across other manufacturing with weak demand evident in some sub-­ sectors. The automotive industry’s exit is still in train and lower levels of mining investment are dampening demand for some types of equipment. Some manufacturers noted cost increasing cost pressure from imported inputs and electricity prices.

The rise was broad-based:

Here’s the detailed break-down:

Hopefully the resurgent Australian dollar won’t kill the expansion.

Full report here.